How does Dubai get its money?

Question

I have seen many claims that Dubai has no income tax. Yet, since the Government of Dubai clearly does spend lots of money, how does money flow to the Government of Dubai?

Answer 1

The other answers discuss taxation in the UAE but omit the elephant in the room.

The UAE is a collection of monarchies (that's what "United Arab Emirates" literally means).

The monarchs collectively own the natural resources of the UAE, including its mineral rights and most of its land, personally (and the proceeds of past oil and gas wealth invested in sovereign wealth funds owned by them), as their own property, and use this personal wealth to fund the government.

Most of this wealth comes from oil and gas mineral rights that the monarchs own, and that is not taxed by anyone else, and the proceeds of that wealth that they have invested, in a geographically tiny federation with a quite small population relative to the magnitude of this wealth.

In addition to "normal" investments, Dubai has excess oil reserves, estimated to be $649 billion (U.S.), that its sovereign wealth fund manages (in a country with a population as of 2020 of 3.38 million of whom 71% are expatriate workers whom sovereign wealth is not intended to benefit, leaving about 980,000 citizens). Its oil reserves are worth about $662,000 (U.S.) per citizen, and that doesn't include very substantial other investments that the monarch, through the sovereign wealth fund, manages.

Taxes are a tiny, second order consideration by comparison.

Like most monarchies without democratic government in a constitutional monarchy regime, the norm is no taxation with no representation (subject to minor exceptions), because the ruling monarchies don't need taxes since they already own the vast majority of the nation's wealth.

Answer 2

Dubai isn't a country but I am guessing that you are talking about the UAE.

The UAE has a couple of taxes which generally tax Companies. It also uses a fee system, which means whenever you want something form the goverment you have to pay for it. Since 2018 they also have a 5% VAT tax.

From the 1. Quarter 2020 revenue report: Source

As you can see about 1/6th of the income is from Taxes. Nearly 1/2 is from something called contributations which is similar to a social security tax in the western world, tho it is mostly paid by the employer (about 5:2) and only for UAE citizens.

"Other federal Revenues" most likely are the fees I talked about earlier tho I am not entirely certain.

Answer 3

I have seen many claims that Dubai has no income tax ...

This is not quite true (emboldening added). See, Taxation in the United Arab Emirates.

The United Arab Emirates is a federation of seven emirates, with autonomous emirate and local governments. The United Arab Emirates does not have any federal income tax. An income tax decree has been enacted by each Emirate, but in practice, the enforcement of these decrees is restricted to foreign banks and to oil companies.

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Q: How does the Dubai state get money?

Emirate of Dubai

• Income Tax

Some types of listed businesses have to pay tax. The most prominent business in the list is the oil business. Oil businesses are taxed at a mind-boggling 55% rate.

Dubai taxes the income of foreign banks operating in their country. This tax rate is levied at a mediocre 20%.

• Entertainment Taxes

Every restaurant in Dubai charges a 10% tax on the total bill. This is called the service charge. However, unlike service charge, the remuneration is not distributed amongst the hotel staff. Rather, the remuneration is sent to the government. This is as good as imposing a 10% service tax on all hotels.

... taxes are levied on theaters, amusement parks or any other source of entertainment and leisure spending.

• Import Duties

Some imports that are at odds with the local Islamic laws are heavily taxed. These items include alcohol, tobacco, arms, and ammunitions, etc. Products such as alcohol are taxed heavily with 50% taxation on imports and 30% tax at the point of sale.

• Taxes on Utilities

Dubai has a big government that has several branches. Each of these branches levies a tax when their services are used. For instance, there is a council tax levied when utility bills are generated. This means electricity bills are taxed at source. Also, in the recent past, Dubai has started levying excessive tolls on the roads frequented by motorists. The collection of these tolls is pretty significant and helps Dubai government supplement their huge expenses. The parking in Dubai is also owned by the state. The charges for parking are very steep. In fact, parking charges are the biggest motivation which forces people to take public transport instead of using their own vehicle.

• Taxes Generated From Expats

Dubai charges people 100 dirhams per year (about $27) to renew their national ID.

... almost all expats stay on rent in Dubai. The Dubai government charges a 5% tax on the rental income generated. This is apart from the council tax that is levied on the property!

Dubai also earns taxes by asking visa processing fee from tourists that visit the country. Also, a charge is levied on every person flying out of the UAE.

Source: Is Dubai Really Tax Free ?